American Law Institute

PHILADELPHIA – On Thursday and Friday, Advisers and a Members Consultative Group from the American Law Institute (ALI) will be convening for a meeting regarding Restatement of the Law as it pertains to liability insurance.

The private meeting will take place on Oct. 6-7 on the 4th Floor of the ALI’s Conference Center at 4025 Chestnut Street in Philadelphia.

Per the ALI’s website, this restatement “covers the law of contracts in the liability insurance context, liability insurance coverage, and the management of insured liabilities.” The ALI publishes the Restatement of Torts, which serve as standards that judges use to decide the law in applicable cases.

The ALI’s governing body offered consideration and approval of the project before work began. At that point in time, a legal scholar is chosen as the “Reporter” on the project and prepares the first draft, with the assistance of fellow researchers.

After the draft is completed, it is sent for revision to a small, select group of "Advisers" consisting of judges, lawyers and law professors possessing specialized knowledge of the subject.

The revised draft is then sent to the ALI Council for further analysis and development, before being referred to the reporter or adviser, or to the annual meeting for consideration by the ALI’s members.

The council may then make its own revisions, and the project is then presented as a tentative draft to an annual meeting of the ALI members for debate, and then likewise made available for public distribution and review. The membership may approve the tentative draft or refer it back to the reporter and advisers.

After a series of tentative drafts have been prepared in this manner, a proposed final draft that is a compilation of all the prior work done on the draft itself is submitted to the council and membership. When final approval is secured, the ALI will publish the final text.

For this Restatement of the Law Liability Insurance Project (which began in 2010), the ALI chose University of Pennsylvania School of Law Professor Tom Baker as reporter and University of Michigan School of Law Professor Kyle Logue as associate reporter.

In a brief video associated with the project, both Logue and Baker commented on the status and goals of the project.

“The Restatement of the Law of Liability Insurance Project is broken down at its most basic level into four chapters: The first chapter is general contract law principles, the second chapter focuses more on the management of the claim, the duty to defend, the duty to settle,” Logue said.

Baker added, “The third chapter, we call that the general principles of the risks insured. That tries to address general topics that are across all kinds of liability insurance: What’s an exclusion? What’s a condition? What’s an insuring clause? How do we deal with deductibles and limits? What happens when there’s more than one insurance policy on the hook?”

He continued, “Chapter Four is going to address a smorgasboard; it includes bad faith liability, remedies and the question of under what circumstances are insurance policy terms not enforceable. And then the fourth topic, which I think is really important, is the question liability for insurance brokers.”

Logue explained there are many examples of areas of insurance law where the law itself is unclear or the reasoning courts use to examine it could be “sharpened,” such as the duty of insurance companies to act in good faith with respect to policyholders, in their decisions whether or not to settle cases brought against their insureds -- which Baker concurred with.

“This way of emphasizing that it’s about the duty to make reasonable settlement decisions, I think, will clear up some miscommunication that courts have had,” he said.

From the Pennsylvania Record: Reach Courts Reporter Nicholas Malfitano at nickpennrecord@gmail.com.

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University of Pennsylvania
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